Candlestick patterns are shapes formed by one or more candles on a price chart that help traders judge whether a trend may continue or reverse. Each candle shows the open, high, low and close for a period, so a pattern is a compact picture of the fight between buyers and sellers. This complete guide explains how to read candlesticks and links to our detailed guides on each pattern.
How to Read a Candlestick
A candle has a real body between the open and close, and thin lines called shadows (or wicks) showing the high and low. A white (green) candle closes above its open and a black (red) candle closes below it. The body size shows the strength of the move, and the shadows show how far price was rejected. For a quick table of the main candle types, see our candlestick patterns cheat sheet.
Types of Candlestick Patterns
Patterns are usually grouped by the signal they give and by the number of candles they use.
Bullish Reversal Patterns
These appear after a downtrend and suggest buyers may take over.
- Hammer candlestick pattern: single candle with a long lower shadow
- Inverted hammer candlestick: single candle with a long upper shadow
- Piercing pattern: two-candle reversal
Bearish Reversal Patterns
These appear after an uptrend and suggest sellers may take over.
- Hanging man candlestick: single-candle warning at a market top
- Dark cloud cover pattern: two-candle reversal
Indecision Patterns
- Doji candlestick: open and close nearly equal; the types include dragonfly and gravestone
Comparison Guides
- Hammer vs hanging man: the same shape with opposite meanings
How to Use Candlestick Patterns Properly
- Identify the trend first. A reversal pattern only matters at the end of a clear trend.
- Look for key levels. Patterns near support or resistance are more meaningful.
- Wait for confirmation. Check the next candle before acting.
- Check volume. Higher volume adds weight to a signal.
- Plan risk. Decide your stop-loss before you enter.
If you are new to charts, start with technical analysis for beginners, and when you are ready to apply patterns, read swing trading for beginners.
Frequently Asked Questions
What are the most reliable candlestick patterns?
No pattern is reliable on its own. Patterns that appear at key support or resistance levels, with high volume and a confirmation candle, are the most useful.
Which candlestick patterns should beginners learn first?
Start with the doji, hammer, hanging man, piercing pattern and dark cloud cover.
Do candlestick patterns work in all markets?
They are used in stocks, forex, commodities and crypto, but they show probabilities, not certainties.
Disclaimer: This article is for educational purposes only and is not investment advice. Trading involves risk, and you can lose money.